> I'm sure someone can explain how this company > can earn $.96/sh and pay out $3.70/sh. Can > anyone help with this?
Let me try...
Let's say you have a taxi cab that you just bought for $10,000 and plan to depreciate it over 10 years. When you buy it, your financial reporting does not show a $10,000 expense; it shows a $10,000 decrease in cash and a $10,000 increase in plant, property, and equipment. Your income statement is not affected, because purchase of capital equipment is not treated as a period expense.
One year goes by, and you record your first depreciation expense in the amount of $1,000. However, this $1,000 is not a cash expense; it doesn't take anything out of your pocket. So, while your income takes a $1,000 hit, your cash flow doesn't.
In case of EEP, in 2004 it had net income of $138 million and depreciation expense of $120 million, which was more than enough to pay $191 million in distributions to unit holders.
For more details, refer to EEP's atatement of cash flows: